Wealth distribution, and tragedy of the commons.

[NotATether]

Money is divided unequally among people causing some to be rich, others in the middle class well-off but not not rich and others in poverty. Due to the richest people now having tens of billions of dollars, compared to the richest ones a century or so ago, the social divide has become so great that people are calling for rich people's money to be broken up, and distributed to the poor. Their assumption is that if everyone has the same amount of money then there will be no more poverty, hunger and homelessness. But here is why this plan won't work for most people.

A lot of people, especially those in poverty and this includes the poor in third world countries as well, are reckless with money management, due to never learning how to manage money (for they never had any money to manage in the first place), and spend all their money on cigarettes, entertainment, and commodities that drain people's wallets over time. Then there are some people who gamble their money away. Then you have other people who'll buy a sports car or a ship or a fancy house on credit and are unable to repay their debts so they keep paying large amounts of money every time period, lose more and more money and eventually become insolvent. So if you distribute money to these kind of people, they will end up becoming poor again quickly. The rich people with money taken from them still know how to make big money, so the cash flow from the poor to the rich becomes POOR PEOPLE --> MERCHANTS --> OTHER MERCHANTS --> RICH PEOPLE, rich people will be rich again, poor people will be poor again, and the middle class perhaps a little better than they were before.

• Wealth distribution to poor people --> most become poor again
• Wealth distribution to middle class --> most become better off
• Wealth distribution *from* rich people --> most become rich again

How all this relates to the tragedy of the commons is that that theory emphasizes that if each person collects more good for themselves, then it deteriorates the common good for everyone involved.

A lot of rich people's money is just sitting around in banks not being sold, invested or traded with. This removes money from circulation just like how bitcoins get lost or locked up, but unlike in bitcoin where theoretically this scenario deflates prices, idle money inflates prices because there are less sellers and buyers.

So I think a solution to the social divide problem is to make rich people spend their money more, so that it goes back into the world economies.

[Darker45]

I agree. If today all the money in the world is confiscated and then immediately distributed back to them evenly, as early as tomorrow there is already rich and poor. That is how the reality of humanity works.

And so I am not a fan of wealth redistribution but I am always in favor of mechanisms which somehow bridge the gap. I simply cannot fathom the wrong side of the human race when people burn millions on gambling tables, shoes, signature handbags, toilet bowls, and so on while their fellow humans can barely eat even once a day, and on scant food devoid of any nutrition.  

Anyway, spending drives up the fiat economy. It helps money revolves around. But I don't think that is different with a Bitcoin-based economy. Businesses will only thrive when people are buying. The more the people are hoarding, regardless if it's fiat or Bitcoin, the more the economy shrinks.  

The difference, however, is that hoarding will inflate the value of that limited Bitcoin while fiat will continue to lose it.

[Upgrade00]

The wide gap between the rich and the poor is usually a direct result of a divide in other areas like education and access to opportunities. The poor usually don't have access to education or to acquire a skill, this already puts them at a disadvantage, as the opportunities they are qualified for becomes limited and low paying, keeping them within their class range.
The rich on the other hand can access the best level of education, putting them in a privileged group on which they can leverage for support and get connected to even better opportunities. Reason why people would spend lots of money to get their wards into Ivy league schools as it helps to build their network.

A lot of people, especially those in poverty and this includes the poor in third world countries as well, are reckless with money management, due to never learning how to manage money (for they never had any money to manage in the first place), and spend all their money on cigarettes, entertainment, and commodities that drain people's wallets over time.

Access to education would improve their management abilities.
Wealth distribution would not work by simply taking from the rich and giving to the poor, it's also an unsustainable idea. The society can rather be built to give people from different classes equal opportunities and help close the gap

A lot of rich people's money is just sitting around in banks not being sold, invested or traded with. This removes money from circulation just like how bitcoins get lost or locked up, but unlike in bitcoin where theoretically this scenario deflates prices, idle money inflates prices because there are less sellers and buyers.

Locked up bitcoins reduces the supply and at equal demand this increases the value of Bitcoin rather than deflating it.

So I think a solution to the social divide problem is to make rich people spend their money more, so that it goes back into the world economies.

The products bought by the rich is of a certain quality, and if they improved spending it would affect brands who provide such quality, whose owners are likely also in the rich bracket. It may open up more lower class jobs, but they are usually underpaid and overworked. The workers at iPhone factories would benefit little from rise in Apple stocks, but guess who would...

[davis196]

A lot of rich people's money is just sitting around in banks not being sold, invested or traded with. This removes money from circulation just like how bitcoins get lost or locked up, but unlike in bitcoin where theoretically this scenario deflates prices, idle money inflates prices because there are less sellers and buyers.

You are wrong.No money can "just sit around" in the banks.The banks are giving loans and investing that money to make profits and pay interest rates(which are very low,by the way).The amount of fiat money in circulation is constantly increasing,causing increased inequality and inflation.
There's no such thing a "fair wealth distribution". This is some utopian leftist idea.
Most of the rich people have skills,talents,education,inherited property and assets,motivation and will power.
If you impose higher taxes over them,they will still be rich,while if you increase the government aid for the poor,they might become lazier than before and more dependent on the government.
The tax system can't create equality.

[plvbob0070]

I would agree to @davis196 that money does not just stay in the bank. When rich people deposit their money in the bank, it will still continue to circulate, but their assets will remain the same unless it will increase from the interest rate or decrease from spending it. Banks even promote depositing money in the bank than saving it at your houses to keep the money circulating.

And I also think rich people are spending their money more than the middle and lower class because they have more money to spend. It's just that, the way they spend it, it also comes back to them by gaining income just like what you have said "money management". For me, even if we keep on redistributing money to give everyone an equal amount of wealth, it will just come back to what we have now. Rich and poor people will always be there, not only because of money but also because people don't have the same opportunities in life.

[Poker Player]

The the fairest distribution of wealth is just: let people earn it. With few exceptions.

Communist countries, where their rulers came to power with a discourse against the rich, are also unequal. There are very few rich people, those in power, and then there's the rest of the population going hungry. Castro, Maduro, Kim Jong-un are all multi-millionaires and I never hear a discourse against inequality in their countries. There seems to be only inequality in developed countries.

[Bttzed03]

A lot of rich people's money is just sitting around in banks not being sold, invested or traded with. This removes money from circulation just like how bitcoins get lost or locked up

You are wrong.No money can "just sit around" in the banks.The banks are giving loans and investing that money to make profits and pay interest rates(which are very low,by the way).

Exactly. They act as custodian but uses depositor's money to make more money. The only money that sits there are the "reserves" which probably accounts for a few percent of the total amount deposited. The better comparison would have been rich people's money sitting on their personal vault instead of depositing in banks.

~ but unlike in bitcoin where theoretically this scenario deflates prices, idle money inflates prices because there are less sellers and buyers.

Like what @davis196 said, fiat inflates because governments can print money out of thin air. If people hoards bills, that will only force government to print sooner than expected.

~ So I think a solution to the social divide problem is to make rich people spend their money more, so that it goes back into the world economies.

Rich people spending more won't necessarily make poor people become rich. What could possibly happen is that a country's economy could be more robust because of the increased consumption.

Let's try to illustrate the flow:

• Rich person constantly buys stuffs from the store of a middle class...
• Store owner makes profit which helps him keeps his business for long term and pay its employees...
• Employees continues to enjoy their salary which they use to buy their needs and wants from businesses owned by that rich person...

Can you see what I mean from the illustration?

Rich people can spend as many as they want but none of them would want to go bankrupt. I just don't see them splurging without thinking of ways to earn them back in two or even three folds.

The better solution would be to educate the poor people how to eradicate the problems which you enumerated here:

A lot of people, especially those in poverty and this includes the poor in third world countries as well, are reckless with money management, due to never learning how to manage money (for they never had any money to manage in the first place), and spend all their money on cigarettes, entertainment, and commodities that drain people's wallets over time. Then there are some people who gamble their money away. Then you have other people who'll buy a sports car or a ship or a fancy house on credit and are unable to repay their debts so they keep paying large amounts of money every time period, lose more and more money and eventually become insolvent.

 

[mersal]

The the fairest distribution of wealth is just: let people earn it. With few exceptions.

Communist countries, where their rulers came to power with a discourse against the rich, are also unequal. There are very few rich people, those in power, and then there's the rest of the population going hungry. Castro, Maduro, Kim Jong-un are all multi-millionaires and I never hear a discourse against inequality in their countries. There seems to be only inequality in developed countries.

Those countries don't let anyone to speak out about the situation and most of them were poor means they have to be obedient to their lords to get the money what they make or they will go into prison for the rest of their life.Inequality in wealth distribution is everywhere and it is not the modern day problem it exists from the ancient age, kings will have the money and the people only had very little money but still they are the one have to pay taxes to the king.

[Coyster]

A lot of people, especially those in poverty and this includes the poor in third world countries as well, are reckless with money management, due to never learning how to manage money (for they never had any money to manage in the first place), and spend all their money on cigarettes, entertainment, and commodities that drain people's wallets over time. Then there are some people who gamble their money away.

Not true imo, those in the poor class value any money they can lay their hands on, I do not know where you got the idea above from, but people I know who aren't wealthy are prudent with how much money they spend, down to the last dollar bill, if you spend recklessly while in poverty, you'll definitely run out of funds and inevitably, food. It's the rich class imo that can afford to be reckless with how much they spend, it's a normal human trait, you can afford to spend money with less caution, when you know there is a large inflow of income for you and you do not have to worry about basic needs like food and the rest.

It'd be good if society can be classless, but in the world today, it's a case of the rich getting richer, while the poor, poorer. The gap is wider than ever atm and more impossible to breach.

[abhiseshakana]

Not true imo, those in the poor class value any money they can lay their hands on, I do not know where you got the idea above from, but people I know who aren't wealthy are prudent with how much money they spend, down to the last dollar bill, if you spend recklessly while in poverty, you'll definitely run out of funds and inevitably, food. It's the rich class imo that can afford to be reckless with how much they spend, it's a normal human trait, you can afford to spend money with less caution, when you know there is a large inflow of income for you and you do not have to worry about basic needs like food and the rest.

It'd be good if society can be classless, but in the world today, it's a case of the rich getting richer, while the poor, poorer. The gap is wider than ever atm and more impossible to breach.

The era of free markets and democracy creates a dynamic with which the values of the human life system are waning. The most important thing is the market and how it is accepted by the market. Everything, from values, culture, art, to the norms of life, are all commercialized in order to be accepted by the market.

What is even more sad is that the lower and middle classes are only used as a market for the upper class and also as a motor of production (as consumers and as workers). So that the circulation of money is flowing fast upward in large and fast but dripping down slowly. So that money collects in the upper class, who is the ruler at the top of the pyramid.

We should start doing a consolidated bottom of the pyramid, so that the economy rotates horizontally in the middle and lower classes. Indeed, large corporations with all of their established global supply chains have plagued every country and provide products that look cheap. But if the bottom of the pyramid is compact and consolidated, even large corporations can leave (for example, Unilever).

[bitgolden]

The thing about the rich people is that if they paid taxes properly instead of moving their money and profits to offshore accounts, the poor people would get incentives for working and they wouldn't be poor and everyone would be either below average or higher.

Think about a world where the students are getting education for free, healthcare is free, school meals are free, and there is guaranteed housing from government, and students even get paid scholarship money for studying for their regular life expenses (even though school is free) and there is jobs guarantee by the government.

Now that means nobody is really THAT poor right? Sure you can still be below average and not live a luxurious life but if you have these, you will live a proper life right?

Well, Norway is like that and they are fine, richest nations in the world incapable of doing that makes no sense if you ask me.

[gentlemand]

If we dumped 1000 people on a virgin planet within a few months we'd see the exact same disaparities. Some people are born to chuck their money away. Some are born to never get ahead. Some are born to scoop it all up from such people.

It appears to be innate to human nature so until you start rewiring us it'll never go away.

I feel for those in grinding poverty but my attitude to those who are not and nobble themselves has gradually evolved to - fuck 'em.

[kezinaur14]

I agree. If today all the money in the world is confiscated and then immediately distributed back to them evenly, as early as tomorrow there is already rich and poor. That is how the reality of humanity works.

And so I am not a fan of wealth redistribution but I am always in favor of mechanisms which somehow bridge the gap. I simply cannot fathom the wrong side of the human race when people burn millions on gambling tables, shoes, signature handbags, toilet bowls, and so on while their fellow humans can barely eat even once a day, and on scant food devoid of any nutrition.  

Anyway, spending drives up the fiat economy. It helps money revolves around. But I don't think that is different with a Bitcoin-based economy. Businesses will only thrive when people are buying. The more the people are hoarding, regardless if it's fiat or Bitcoin, the more the economy shrinks.  

The difference, however, is that hoarding will inflate the value of that limited Bitcoin while fiat will continue to lose it.

Correct on that last sentence.

I actually think there's already many people burning through millions in gambling tables already and they're not the poor people. It's disingenous to pretend that everyone would just waste away the money, when many would actually use it for something productive, you know?

[Febo]

So I think a solution to the social divide problem is to make rich people spend their money more, so that it goes back into the world economies.

LOL definitely. But how? You cant have 100 houses and 100 cars and 100 boats and 100 planes. Problem is that some are so rich that they simply cant spend even tiny part of their money.

[Harlot]

What do you mean by "spend their money more" since it can mean a lot of ways. Like if they just spend their money in more kinds of investments then only the rich businessmen will benefit from such investment as well as the rich people who decided spending their money. But if you mean by "spend their money more" on raising salaries of their employees or something similar this won't really be beneficial for our economy as what will happen is if people will have a higher average wage then their buying power would just decrease as the supply of money has increased to a lot of people. Even the basic law of supply and demand can fuck up your solution.

[hatshepsut93]

A lot of rich people's money is just sitting around in banks not being sold, invested or traded with. This removes money from circulation just like how bitcoins get lost or locked up, but unlike in bitcoin where theoretically this scenario deflates prices, idle money inflates prices because there are less sellers and buyers.

Actually, inflation creates a strong incentive to not store fiat money without any sort of investment. If it was like you say, rich people would become poorer with time. And you're talking about billionaires, but everyone knows how they became billionaires and keep growing their wealth - it's all because of the stock of their company.

Saying that economic problems come from a lack of spending is basically Keynesianism, and right now only some elements of it are a part of mainsteram economic thought. It had been tried many times and didn't miraculously cure a struggling economy.

[bitsurfer2014]

I can relate on everyone's ideas here and I just want to add one thing which I think would also be a critical factor in narrowing the gap on social inequality - the Government!

Take the case in my country:

* The Government has allowed big businesses to abuse ordinary people with unfair trade practices etc...
* The Government has rampant corruption including with government officials and politicians which in turn affects the delivery of basic services to common
   people.
* The Government write off on defaulted huge loans of big companies while they pressed hard on ordinary folks small time loans.

So in essence the Government lays the foundation and encourages this social inequality to further widen its gap making it a conducive environment for the rich to become more richer and the poor to become more poorer. I think good governance will narrow this gap eventually.Imho.
 

[abhiseshakana]

* The Government has allowed big businesses to abuse ordinary people with unfair trade practices etc...

Because oligarchs and plutocrats always control the government in a country. Whereas the progress of a country is not due to democracy or its form of government, but rather because of the freedom to think, create and innovate for the benefit of human life. If politics becomes the benchmark for the state, then the oligarchs will move wild and maneuver in full lobbying. When politics is put forward, millennials also want to become oligarchs and influence the government by maneuvering power, as well as too many rules that limit the progress of the economy.

* The Government has rampant corruption including with government officials and politicians which in turn affects the delivery of basic services to common
   people.

Use the right to vote as well as possible in the general election. Get to know your candidate and vote based on the facts of his work, dedication and honesty. Do not just choose, dare to take responsibility with the thought that, if there is mismanagement by the government as a result of our mistake, namely the wrong choice of our representatives.

We can imitate the policies of a country, not follow the policies of other countries. To fight corruption we can use extreme measures, for example Xi Jing Ping did by executing thousands of politicians and government officials who commit corruption, so as not to become an economic burden on the country.

* The Government write off on defaulted huge loans of big companies while they pressed hard on ordinary folks small time loans.

The oligarchs and top rulers of the pyramid are very consolidated, although they are few in number, they are united and synergized to maintain their wealth and try to make their wealth immortal. They use banks to increase their wealth, and the government protects the banks with various policies which incidentally protect the interests of the oligarchs. Even though banks are intended for the rich who can take loans with low interest because they have collateral, while for those who do not have collateral or small and medium businesses the interest is very high. Banks are considered to be the saviors and lifeblood of the country's economy, even though it is banks that often cause economic disease in a country.

[stompix]

What is even more sad is that the lower and middle classes are only used as a market for the upper class and also as a motor of production (as consumers and as workers). So that the circulation of money is flowing fast upward in large and fast but dripping down slowly. So that money collects in the upper class, who is the ruler at the top of the pyramid.

I've been hearing this theory a lot from a few fellow workers from the most eastern (and poor) countries of the EU, mainly Bulgaria and Romania. In a few of their minds, the whole EU is a mechanism so that their countries become poor and are used as a market by the wealthier nations, of course, every time I ask them how the f word do you plan to sell something to a guy you've bankrupt and has not a penny left I only hear crickets.

Think about a world where the students are getting education for free, healthcare is free, school meals are free, and there is guaranteed housing from government, and students even get paid scholarship money for studying for their regular life expenses (even though school is free) and there is jobs guarantee by the government.

And then wake up!

Well, Norway is like that and they are fine, richest nations in the world incapable of doing that makes no sense if you ask me.

Norway affords that because of oil and gas and a very low population compared to the number of natural resources at hand.It's nothing magical, once those run out it's back to nothing is free anymore.

A lot of people, especially those in poverty and this includes the poor in third world countries as well, are reckless with money management, due to never learning how to manage money (for they never had any money to manage in the first place), and spend all their money on cigarettes, entertainment, and commodities that drain people's wallets over time. Then there are some people who gamble their money away. Then you have other people who'll buy a sports car or a ship or a fancy house on credit and are unable to repay their debts so they keep paying large amounts of money every time period, lose more and more money and eventually become insolvent. So if you distribute money to these kind of people, they will end up becoming poor again quickly.

I will not touch the whole redistribution of wealth thing, it has proven a lot of times it doesn't work and it will not work, you have to be a total moron to think this is the solution, I'm really getting tired of it.

But some have touched a more important aspect, education! And not education as in maths and Latin but financial education, I really think this must be made mandatory at a highschool level, it's a lot more important than everything else for a guy who will not specialize in a certain work, if you're choosing to be an artist, a doctor, a mechanic, financial education will be more important than history or geography. A lot of people don't have the slightest ideas about how things in the economy work, a lot of failed businesses happen because they fail to understand basic facts, and the lack of knowledge is sometimes bankrupting just as many as a crisis. You don't need a master's degree in it, and you don't need a master's degree in anything to get a good-paying job and enjoy a pretty nice life, but you need to know the basics when shits hit the fan, and the most annoying fact is that when people with low education fail they tend to embrace conspiracies theories rather than acknowledging their own faults and with this, they start again with wealth redistribution because the rich....

In the past it was easy, all you needed to know it was that you have to sell the pig for 2 golden coins and that will get you enough to go through winter, you could do that even if you were illiterate, nowadays I think it's impossible to run even a lemonade stand without basic economics.

[Vishnu.Reang]

LOL definitely. But how? You cant have 100 houses and 100 cars and 100 boats and 100 planes. Problem is that some are so rich that they simply cant spend even tiny part of their money.

Till now I haven't heard about any such individual. I am talking about those who are so rich that they face issues in spending their money. Even the richest person in earth can't afford certain things. So we are not yet up to that level. But income inequality is increasing and within a few years, or at most a few decades we may witness such a situation. BTW, who will manage to become the first trillionaire? Jeff Bezos and Bill Gates may be too old by then.